‘Don’t take growth for granted’: Ruchir Sharma says fates of former star economies carry lessons for India

Ace investor and author Ruchir Sharma believes there are lessons for India from countries that once were branded as superstar economies but since have shrunk.

Speaking at the India Today Pop-Up Conclave, Sharma said while he was “very positive” on India in the long term, there was still a “lot more work that needed to be done.”

“Never take growth or economic success for granted,” Sharma said, citing examples of countries such as Canada, which was once a star but is now witnessing the worst economic performance in the past 10 years. He went on to mention Germany, South Africa and Chile among what he called ‘breakdown nations’.

To a question on if political stability can ensure India does not find itself stuck in a growth trap, Sharma said the best model for India is a government that “truly believes in reducing its role in people’s lives”. 

Sharma stressed on the effort to build better business confidence for foreigners and domestic audience. He further said that “extensive use of investigative agencies or giving them too much power” has deep consequences as far as investment was concerned. 

“There’s an economic consequence to that,” he said.  He added that India has the “most expensive” stock market in the world currently.

“It is also the reason why foreign investors are being skittish about coming in. The on-ground environment still needs to be improved a lot for foreign direct investment. We are attracting FDI as a share of the economy at over 1% of GDP,” Sharma said.

In contrast, Sharma said that China was attracting 4% of GDP in terms of how much foreign investment as a share of the economy. During the session, Sharma highlighted that no country in the world has seen the kind of wealth creation India has seen in the past five years, but added that “it’s been entirely domestic-money led. Foreign participation has been very little”.

Sharma credited the BJP-led NDA government for keeping inflation under check. He said anti-incumbency would have been “much greater had inflation been galloping at 8-9%”.